Can parties contract out of limitation periods in the Limitation Acts?

22 July 2021

What happened?

In Price v Spoor [2021] HCA 20, a mortgage contained a term whereby the mortgagor effectively agreed not to raise the expiry of the statutory limitation period in the Limitations of Actions Act 1974 (Qld) (Act) as a defence to an action by the mortgagee to repay a loan.

Sections 10(1)(a) and 13 of the Act provide, respectively, that:

  • an action on a simple contract cannot be brought after the expiration of 6 years from the date of the breach; and
  • an action to recover land shall not be brought after the expiration of 12 years from the date the right accrues.

All States and Territories have statutes providing similar limitation periods (Limitation Acts).1

The mortgage was not repaid by the repayment date on 2 July 2000. It was not disputed that if the contract term was unenforceable and the above limitation periods applied, the mortgagee’s rights to seek repayment of the loan were well and truly statute-barred.

What did the High Court say?

The High Court unanimously held that limitation periods in the Act could be excluded under the terms of the mortgage.

Consistent with a line of previous decisions,2 the High Court held that whether it is possible to waive or renounce a right under a statute, (such as a right to rely on a time bar) depends on whether it contains express words prohibiting this or whether this would be contrary to public policy.

The Act contains no express words prohibiting waiver. While the public policy behind the legislation of ensuring the finality of litigation has long been acknowledged, the “critical question” is whether the benefit is personal to the individual or whether it rests upon public policy.3 The benefit under the Act was regarded as personal as the wording of the statute was in a form recognised as requiring the remedy to be pleaded. As the defendant may elect to plead or not, so too may it elect, by way of contract, not to rely upon it. All of this pointed to a personal rather than public purpose.4

The court held that the policy of finality in litigation could still be achieved but, consistent with the broad principle of ‘freedom of contract’, it was entrusted to each defendant to decide whether to rely upon it or not. The contractual exclusion of the statutory time bar was therefore upheld.

Should building contractors be worried?

All States and Territories, other than Queensland and Western Australia, have legislation that provides a separate 10-year limitation period for building actions (Building Acts).5 These periods override those in the Limitations Acts.6 While not the subject of the High Court proceedings, it is unlikely the decision provides a strong basis for upholding a waiver of the Building Act limitation periods.

Firstly, unlike the Limitation Acts, the policy behind the limitation periods in the Building Act is to avoid the hardship of long-tail liability to particular classes of defendants. These include builders, consultants and their insurers faced with claims arising from latent defects for which the 6-year general limitation period does not begin until such defects arise (in some cases may be many years after the works are completed).

Secondly, in Victoria and South Australia, the legislation contains peremptory language which suggests that the time limit applies regardless of other considerations, such as the common law’s general tolerance of bargains (which the High Court took into account). For example, the Building Act 1993 (Vic) states that the 10 year limitation period applies “[d]espite anything to the contrary in the Limitation of Actions Act 1958 or in any other Act or law”.

Why is this case important?

The decision is more significant in jurisdictions where the Limitation Act is the last line of defence (Queensland and Western Australia which have no 10 year limitation period for building actions). In those jurisdictions the parties can agree to longer or shorter limitation periods.

The decision is also relevant to construction-related dispute that fall outside the scope of the Building Act limitation periods. Actions that do not involve claims for damages for loss or damage arising out of or concerning defective building work are not covered. These include:

  • actions in debt, or based on an indemnity or guarantee given by a non-builder;7 or
  • actions arising from conduct unconnected to building work, for example a misrepresentation as to building approvals and certificates.8

Nevertheless, it is fair to say that the vast majority of standard building disputes between principals and contractors will be caught by the Building Act limitation periods.

Until the Building Acts are considered by the courts in the context of the High Court’s decision, contractors should still be wary of any provision that seeks to extend or exclude any statutory limitation periods. Apart from the risk of long tail liabilities, such exclusions (if upheld) may breach “assumed liability” clauses typically found in contract works and liability policies.

This article was written by Paul Graham, Partner, Brian Rom, Special Counsel and Kai-Yang Goh, Solicitor.

1 Limitations of Actions Act 1974 (Qld), Limitation Act 1969 (NSW), Limitation of Actions Act 1958 (Vic), Limitation Act 1974 (Tas), Limitation of Actions Act 1936 (SA), Limitation Act 2005 (WA), and Limitation Act 1981 (NT).
2 Westfield Management Ltd v AMP Capital Property Nominees Ltd (2012) 247 CLR 129 at 143-144 [46] per French CJ, Crennan, Kiefel and Bell JJ and English, Canadian, and New Zealand decisions referred to therein.
3 The Commonwealth v Verwayen (1990) 170 CLR 394 per Mason CJ at [405].
4 Cf provisions in legislation that involve a condition precedent to the court’s jurisdiction or which comprise an element of the cause of action.
5 See Building Act 2004 (ACT) s 142; Environmental Planning and Assessment Act 1979 (NSW) s 6.20; Building Act 1993 (NT) s 160; Planning Development and Infrastructure Act 2016 (SA) s 159; Building Act 2016 (Tas) s 327; Building Act 1993 (Vic) s 134.
6 See Brirek Industries Pty Ltd v McKenzie Group Consulting (Vic) Pty Ltd [2014] VSCA 165.
7 Dinov v Allianz Australia Insurance Ltd (2017) 96 NSWLR 98; [2017] NSWCA 270.
8 Hueppauff v Inter-Continental Travels Pty Ltd [2001] SASC 119.

Brian Rom

Special Counsel | Melbourne

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